Israel Gets a Big Boost

Promotion to developed-nation status gives its stocks added appeal.

Never mind last year's war with Hezbollah in Lebanon, incessant rocket attacks from the Gaza Strip and growing concern about the possibility of a nuclear-armed Iran. The Israeli stock market is on a roll. Over the past five years to October 15, the Tel Aviv 100-stock index gained a healthy 29% annualized.

Now comes word that Israel's market is being called up to the big leagues, which should result in yet a higher profile for Israeli stocks. The FTSE Group, keeper of more than 100,000 stock, bond and hedge-fund indexes, says it will promote Israel from emerging-market to developed-nation status next June. Because more investors buy into developed markets than emerging nations, the change will pump an additional $3 billion into Israeli stocks, estimates Merrill Lynch strategist Michael Hartnett.

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Contributing Editor, Kiplinger's Personal Finance